Why New PG&E CEO Patricia Poppe Could Help Restore Trust In Company, Stock

Over the last five years, shares of utility company PG&E Corporation PCG have fallen over 75%. The downward move comes as the company faces lawsuits over fires in California and emerged from bankruptcy.

A new CEO for the company could change the outlook on beaten-down shares of this large utility company.

New CEO: On Nov. 18, Patricia K. Poppe was announced as the new CEO for PG&E. The now-former CMS Energy Corporation CMS CEO will step into her new role on Jan. 4, 2021.

Poppe has industry knowledge and leadership experience leading CMS, which has 6.7 million natural gas and electric customers in Michigan and is the state’s largest utility. She worked for CMS Energy since 2011, including her role as CEO since July 2016. While at CMS, Poppe led the company’s efforts in lowering safety incidents, boosting customer savings and focusing on clean energy.

Prior to roles at CMS, Poppe worked for Michigan utility DTE Energy Company DTE and General Motors Company GM.

Turnaround At PG&E: The largest utility in California faces significant challenges. The company has 16 million customers in Northern and Central California.

"I am eager to get to know the PG&E team and join in the critical work of strengthening PG&E for California’s next generation and earning back the community’s trust,” Poppe said in a Nov. 18 press release.

The California Public Utilities raised concerns earlier this month about PG&E being able to provide a safe and reliable service. The company could be placed under enhanced oversight and enforcement as a result.

Patricia Poppe. Courtesy photo.

Proven Success: The Wall Street Journal said Poppe faces big challenges at PG&E in restoring the public’s trust. Shares of PG&E hit new eight-month highs when Poppe was announced the new CEO, which could show some optimism in the new leader.

Poppe had consistent earnings at CMS and also maintained good relationships with state regulators and lawmakers.

While at CMS, Poppe retired 7 coal-fired plants and doubled the renewable energy capacity for the company. The new CEO is one of the utility industry’s biggest advocates for electric vehicle infrastructure. This could be a big positive going forward as California Gov. Gavin Newsom has pushed for zero emissions and increased sales of electric vehicles.

What’s Next: PG&E froze its dividend for three years. CMS Energy had a history of raising its dividend every year, so it could be interesting to see what decisions are made under Poppe on dividends when they are reinstated.

Several large funds have been taken larger stakes in PG&E:

• In the third quarter, David Tepper’s Appaloosa Fund increased its stake in PG&E from 8.9 million shares to 80. 9 million shares.
• Seth Klarman’s Baupost Fund increased its PG&E holdings from 4.7 million shares to 30.7 million shares. 
• Third Point, ran by Dan Loeb, took an initial stake of 84.9 million shares of PG&E in the third quarter.

Price Action: Shares of PG&E are up 17% in 2020. While Poppe was the head of CMS Energy, shares increased 35% in four years and paid a 2.9% annual dividend yield.